New broom Whitman plans to keep HP's PC business

Emma Woollacott, 28th October 2011

With ex-CEO Leo Apotheker gone, HP's decided not to follow through on his plan of selling off its PC division.

The company announced in August that it was planning to spin the unit off and was looking for a buyer. The Personal Systems Group (PSG), is large, accounting for nearly a third of the company's business, but has also been its least profitable division.

But Apotheker's successor, Meg Whitman, says that after a strategic review, she's decided that hiving the unit off doesn't make sense.

"HP objectively evaluated the strategic, financial and operational impact of spinning off PSG," she says in a statement.

"It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees."

The about-turn is based on the fact that PSG has become deeply integrated with the rest of the firm in terms of supply chain management, IT and procurement. It's large orders for components such as memory chips helped keep prices for its servers down too.

Spinning the division off, says Whitman, would cost more money than it saved.

The decision has been welcomed by analysts.

"Beyond the reasons cited, supply chain and sales synergy and expense of spinning out, it's also crucial for HP to remain in the market for personal devices, which is entering a period of radical transformation and opportunity," says Forrester analyst Frank Gillett.

"By keeping PSG, HP has the opportunity to innovate and differentiate in a PC market that will move away from commodity patterns."

The statement, however, doesn't mention WebOS, which has also been widely tipped for closure. Nobody else seems to want to buy it.